Buy Va Tech Wabag; target of Rs 630 Sharekhan

Sharekhan's research report on Va Tech Wabag

Va Tech has shifted its strategic focus from the low-margin European business and shifted towards high-margin EP and O&M projects, which led to margin expansion but lower revenue. Therefore, PAT lagged estimates as OPM beat was offset by revenue miss. Order backlog stands at Rs. 10,942 crore (3.9x TTM revenue) and order pipeline is promising across India, Russia, Middle East, and other African countries. Va Tech‘s focus on technologically advanced EP projects and increasing share of O&M contracts would improve margins, cash flows, and working capital cycle. We build in revenue/adjusted PAT CAGR of ~9%/~15% over FY2023-FY2026E. The stock trades at an attractive P/E of ~9x its FY2026E EPS.

Outlook

We maintain Buy with an unchanged PT of Rs. 630, given its strong order inflow, promising pipeline, and margin tailwinds.